"KPharma" Moves Beyond Asian Comparison To Global Pharma Industry

By Louis Garguilo, Chief Editor, Outsourced Pharma

I’ve enjoyed visits to Boryung, Dong-A, Green Cross, Hanmi, Il-Yang and Yuhan.

Do you recognize these names? How about LG Life Sciences and Samsung Biologics? These are some of the companies clustered in and around Seoul, forming South Korea’s advancing pharmaceutical industry. If they aren’t all global brands yet, chances are more will be in the near future.

Encouraged by highly publicized government initiatives and funding, South Korean pharma (KPharma, for short), already playing a strategic role in the development of global biosimilars, is moving well beyond its myopic domestic and generics focus to new drug discovery and global healthcare markets.

To do this, KPharma continues to look for international partners. In a recent article, Kim Oak-yeon, managing director of Janssen Korea, said, “For Korea’s pharmaceutical industry to grow, the foremost task will be globalizing local drug companies. And for them to globalize, it’s necessary to increase the overall size of the pharmaceutical industry.” Janssen Korea itself was formed via a partnership with South Korean’s Yuhan Corporation.

South Korea also has a growing biotech sector. To mention a few, MEDIPOST is a leading stem cell research company; PharmAbcine specializes in fully human therapeutic monoclonal antibodies (mAb); and PANAGENE has developed a HPV (Human Papillomavirus) genotyping chip. Biotech parks are flourishing, including the Gyeonggi Bio Center, established in 2006.

Regarding outsourcing, the industry has already established itself in the clinical trials space. Now the aforementioned Samsung Biologics is the face of an outsourcing industry providing drug discovery, development and manufacturing services.

Neighborhood Comparisons

Inevitably, this peninsula-country gets compared to its archipelago neighbor, Japan. Personally, I can’t help but draw some parallels as well.

Japan went through a similar phase of purposely turning outward to face global drug discovery competition and markets, starting in the ‘90s. Like South Korea, Japan experienced communications challenges in using English; had already established famous global corporations successful in other industries; possessed a strong infrastructure and educated population, and an advanced healthcare system and domestic drug market.

In fact, I first visited Seoul in 1982 via a short flight from my home in Osaka. Three recollections from that initial trip: Seoul felt comparatively provincial and economically unhurried; it seemed every car on the road was Japanese; despite the preponderance of the chaebol (business conglomerates), Koreans were entrepreneurial in spirit.

Today, a visit to Seoul locates us in what is now considered the third largest urban area in the world, with a population approaching 23 million (about half of the entire country). There is a palpable economic vitality, for me comparable to Japan’s during the go-go ‘80s. Every car on the (congested) roads of Seoul now appears domestically designed and manufactured. The only constant from that first visit is the readiness to get business deals done, this time specifically in the pharmaceutical-related industries.

Beyond the Japan comparisons, there is little doubt South Korea will most fulfill the promise of the Asian Tigers, named for their economic growth in the ‘90s. While Hong Kong, Singapore and Taiwan are global players in their own right (particularly Singapore in our industry), South Korea’s population, healthcare market-size and overall economic power will pull it away from the others. Interestingly, the Asian financial crisis of 1997, which seriously derailed these economies and caused global ripples, may have had its worst short-term impact on South Korea. However, the collective resiliency—and lessons—born of that crisis has largely fed the national economic confidence of today.

Regarding neighboring China, KPharma has forged close relationships there, particularly in the outsourcing industry. A few years ago in Seoul I gave a presentation on outsourcing to Korean drug discovery managers. It was clear they were still hesitant to outsource globally, with the exception being China. Partnerships between companies in those countries have continued to expand, with the potential for the formation of some interesting new entities in the future.

The Present And The Promise

A Global Data report says the South Korean pharmaceutical market is one of the largest in Asia, at $18.6 billion in 2013 and expected to reach $24.3 billion by 2020. The medical device market, by the way, is also experiencing consistent growth and is expected to reach well over $6 billion by 2020. 

Market growth is primarily due to an aging population, an advanced medical community and knowledgeable healthcare consumer. The report also cites the government’s recognition of the pharmaceutical industry as key to the country’s economic growth. It made bold changes to agencies overseeing the pharmaceutical and medical sectors to provide a “transparent, strong and efficient regulatory system to facilitate faster approval of pharmaceutical products and medical devices.”

A PwC report ranks South Korea closely after China and India as the third “best outsourcing destination” in Asia. We should be careful to note this ranking is mostly based on the conducting of clinical trials, as mentioned above an area where South Korea already plays a global role, and one helping it gain international relationships.

This PwC ranking is important because it’s based on the factors of market opportunity, risk, and cost. “With a rapidly growing pharmaceutical industry comprising over 2,000 companies operating in the manufacture of drugs, quasi-drugs and cosmetics, Korea has experienced a double digit pharmaceutical market growth and is second only to Japan in terms of potential in Asia,” according to the report.

A recent example of a global industry partnership is the one announced in June between Australia’s largest CRO, Novotech, and the Korea Drug Development Fund (KDDF), “to promote the development of the Korean biotechnology sector in the Asia Pacific region.” The partnership is backed by a KDDF fund of $1 billion for drug development, “aiming to produce 10 new treatments by 2019.”

Novotech joins companys such as Parexel International and WCCT Global in working with the KDDF. In 2012, WCCT Global’s CEO, Dr. Kenneth T. Kim, said it was exciting “to help Korean companies bring new medicinal products to the US and allow them to be represented and supported through the drug development process in the US. ”

Western pharma well established in South Korea include GSK, Bayer Healthcare, Takeda (Japan), Abbott, Janssen, Pfizer (which has an interesting 2009 case study on its website about interactions with South Korea). Incidentally, Pfizer’s $300 million investment in the country in 2007 is said to have been a watershed for big pharma’s further involvement there. In 2010, GSK entered a strategic alliance with Dong-A Pharmaceuticals Co., Ltd., the number one pharma and OTC company in South Korea, to share profits from co-promoted products.

Pharma is also looking to take advantage of the other advanced industries in South Korea.

In an article in the Korean press in April, Kim Jin-ho, managing director of GSK Korea, says, “The opportunity we see in Korea is that there can be more investment in the bioelectronics sector. What this means is that there is an opportunity to merge Korea’s IT industry and GSK’s basic science to provide better health care.”

Finally, as we all are too aware, geopolitical tension and uncertainty still remains in the larger Korean territory, and will eventually have to be dealt with. Nonetheless, all signs point to South Korea as surmounting regional comparisons and claiming its own distinct and expanding role in the global bio-pharma industry.